Special thanks to Source One Management Services for this guest post
Whether you’re purchasing new telecom services or simply renewing existing services, there are countless contact intricacies you should be aware of before signing on the dotted line. Believe it or not, typical telecom contracts are actually written in the supplier’s best interest and do not typically offer equal liabilities for all parties involved – making it all the more necessary for companies to be aware of the terms and conditions to which their committing. Don’t panic, knowledge is power. Here are a few T’s and C’s you should look out for, as well as tricks to leverage best-in-class pricing.
First things first, when you negotiate is just as important to what you’re negotiating when it comes to gaining the most leverage for concessions and flexibility. Whether you are renewing an existing contract or looking to change suppliers, it is always best to start discussions at least half way through the existing service term, if not sooner. This will give you the chance to research the market for alternate providers and solutions and develop a roadmap for required changes.
For example, if you are going to upgrade to a new technology and potentially a new supplier you will need time to research, compare, and test the market. Depending on how many locations affected by the transition, the process can take several months based on resource constraints, budgets, and other variables that may come up during a migration/upgrade. Suppliers can be very helpful in this process but you should identify any roadblocks in advance to allow yourself enough time to make the change without running into existing contract liabilities. Remember existing contractual liabilities can lead to defaulting to tariff pricing and service levels if the contract expires.
Once you have established the services you will be requiring and receive a proposal, you should pay attention to:
Commitments – What are the financial and term obligations you have for each service and are they consistent throughout the contract? Are there monthly or annual revenue commitments that might be impacted by unforeseen changes? Make sure the commitment amounts/terms are realistic based on current and projected requirements and never commit to 100% or full term on services. Ask for a business downturn clause that will offer allowances for site closures or unforeseen financial impacts to your business.
Renewals – What happens at the end of your contract term? Does the contract renew automatically and for how long; month-month, annual, or even the same term period as the initial term? Also, what notification is required to cancel the renewal clause in advance of the existing term completion? This is a very important clause to review and understand as it can impact financial changes at the end of the initial term or lock you in with the incumbent supplier and service for longer than you require.
Service Levels – This should identify the agreed upon scope or work, expected quality of service and responsibilities/obligations of the supplier for all services being purchased. It is important to identify all of your needs and expectations and ensure the supplier agrees to and documents this via a separate SLA (service level agreement). If this is not clearly identified and there is a service outage for example, the supplier might not be held accountable and any financial considerations or credits expected may not be viable unless detailed in the SLA.
Equal liabilities – Whatever allowance the suppler has should be the same for the customer. A simple area would be for billing/payments. If the supplier allows themselves 120 days to bill you for services, then you should have 120 days to dispute charges.
Upgrades – If you are going to upgrade a service prior to end of term, you should be able to do so without any financial penalty under the existing contract as long as it is with the incumbent.
Miscellaneous and ancillary fees – A contract may stipulate the exact costs for services/products but may not clearly identify other costs such as install, training, management fees, etc. Make sure you have these type of charges documented in writing. You should understand the complete financial obligation in advance especially for budgeting purposes and to guide you in negotiations of the contract.
Contract Length – Technology has evolved more rapidly in the past several years and continues to change, getting better and cheaper in many cases. Typical telecom contracts are anywhere from 2-5 years and it is best not to extend contracts past this period to allow for market condition shifts.
There is a lot to think about when contracting for telecom services and although I have provided a few areas for consideration, there are countless other clauses and terms that should be reviewed. The key is allowing yourself enough time to develop a cost competitive contract that is fair and equal for all parties involved. Preparing well in advance allows for more flexibility when it comes to migrating or changing services. Don’t simply accept the first offer and assume it is the best. An initial proposal or contract should be considered a draft and there is always room for improvement and change.